Wednesday, 31 January 2018

Michael Ioannidis, Senior research fellow, Max Planck Institute for
Comparative Public Law and International Law, Heidelberg.

On 6 December, the European
Commission presented a package of
proposals on the further integration of the Eurozone. This was the first
effort of European institutions to put on paper the rules that could shape
post-crisis EMU, an issue that took centre stage in European politics after
Macron’s election in France and will probably receive a new impetus after the
formation of the new government in Germany. The most important part in
Commission’s package is the proposal to bring the European Stability Mechanism
(ESM) within the EU framework. The ESM, Europe’s main financial assistance
mechanism, was set up in 2012 by an international
treaty between Eurozone Members. For various reasons, legal and political,
it was established as an organization of public international law, outside the
EU. The Commission now proposes that the Council adopts a
Regulation to make the ESM “a unique legal entity under Union law”, change
its name, and add few more tasks to its mandate. Annexed to the proposed
Council Regulation is a
Statute governing the new body that is largely (but not entirely) based on
the current ESM Treaty (ESMT).

Rebranding

The proposed Regulation starts
with a marketing exercise, rebranding the ESM as EMF (European Monetary Fund).
The name EMF was popularised by academics
at the beginning of the crisis as part of the call to establish a European
assistance mechanism, a suggestion that was practically largely realized with
the establishment of the ESM in 2012. The name EMF remained, however, in the
agenda of policy-makers as a symbol of Europe eventually getting its own
regional equivalent of the IMF – and becoming less dependent on the latter in
future crises. The Commission takes on board the widespread charm of the name
EMF – but this is not a choice without its problems.

The new name, having “monetary”
at its centre, alludes to the monetary tasks within the EMU that the TFEU (and
the CJEU in Pringle)
clearly distinguishes from economic policies and ascribes exclusively to the
ECB. Quite expectedly, the body with the closest name to EMF in European
institutional history was the European Monetary Cooperation Fund (EMCF),
established by Regulation
(EEC) No 907/73 with monetary-related tasks. Even if one admits the allure
of IMF’s acronym, two things need to be reminded of. First, the original name
under which the IMF itself was conceived was “International Stabilization Fund”
(ISF). The reason for ultimately adopting IMF instead of ISF was United
Kingdom’s (and JM Keynes’) insistence that the word “stabilization” alluded to
the stabilization funds of the past, used to influence currency exchange rates
and connected to unpleasant British experiences of keeping the pound pegged to
the international gold standard. Such connotations are not of contemporary
concern.

Second, the IMF, which has access
to financial resources through the central bank reserves of its members, has
closer connection with proper monetary authorities than the ESM, which is
financed by issuing bonds in capital markets. The establishment of the European
Financial Stabilisation Mechanism (EFSM) by the EU in 2010, a body within
the EU framework and very similar function with the EMF, attests to the view
that the words “Stability” or “Stabilization” are accurate descriptors of the
function of the future EU financial assistance mechanism. ESF (European
Stability Fund) could thus be a plausible alternative to EMF.

Conditionality

The Commission rebrands the ESM
to mirror the IMF’s name, but it is much more hesitant to give the new body
real IMF-like teeth. There is one single concept that made the Washington-based
prototype famous: conditionality. That is, the power to set and monitor the
conditions under which countries can access IMF resources. In Commission’s
proposal, though, conditionality is not a job for the EMF but mainly for the
Commission itself.

During the crisis, the conditionality task
was shared by three, and later four, institutions: the Commission, the ECB, the
IMF, and, at a later stage, the ESM. The Commission’s proposal deletes all
references of the ESMT on the involvement of the IMF in Eurozone
conditionality, but does not give this role to the EMF. Conditionality is for
the Commission to keep. According to Art. 13 of the proposed EMF Statute,
conditionality is negotiated by the Commission, in liaison with the ECB, and
“in cooperation with the EMF”. “Cooperation” is admittedly a very weak form of
involvement, especially if it’s compared with the phrase “together with” that
previously described IMF involvement in the ESMT. Moreover, MoUs shall be
signed both by the Commission and the EMF. In the ESMT, in contrast, MoUs where
signed by the Commission “on behalf” of the ESM. The phrase “on behalf”,
establishing an agent-principal relation between Commission and the ESM, is now
stricken out, meaning that the Commission becomes legally a co-owner of EMF conditionality.
Finally, under the proposed EMF Statute, compliance with conditionality is
being monitored solely by the Commission, in liaison with the ECB. No role is
explicitly provided for the EMF in this critical phase.

The no-bailout clause and conditions for assistance

At the beginning of the crisis,
when the idea of a financial assistance mechanism for Eurozone Members was
first tabled, Art. 125(1) TFEU appeared to many as a critical legal obstacle.
Art. 125(1) TFEU contains two sentences with two identical prohibitions. The
first is directed to the EU and the second to the Member States. Both the Union
and the Member States “shall not be liable for or assume the commitments” of
(another) Eurozone Member State.

Considering that ESM assistance
could be seen as indirectly amounting to an assumption of commitments, the
Member States thought necessary in 2011 to introduce
Art. 136(3) in the TFEU. According to this provision, “[t]he Member States
whose currency is the euro may establish a stability mechanism to be activated
if indispensable to safeguard the stability of the euro area as a whole. The
granting of any required financial assistance under the mechanism will be made
subject to strict conditionality”. Drafted with the ESM in mind, Art. 136(3) TFEU
only refers to the establishment of a fund by Member States and not by the EU.
It thus “clarifies” only the second sentence of Art. 125(1) TFEU.

Does that mean that establishing
the EMF as an EU body contravenes Art. 125(1) first sentence TFEU? The answer is
no. In Pringle, the CJEU adopted an
interpretation of Art. 125(1) TFEU that allows financial assistance if it is
indispensable for the stability of the Eurozone and is coupled with “strict
conditionality”. Although in Pringle
the Court was called to interpret the second sentence of Art. 125(1) TFEU, that
is directed to the Member States, the first sentence, which will be relevant
for the EMF, should be read in the same way: a Fund established by the EU that
meets Pringle-conditions is compatible with Art. 125(1) TFEU.

Whether the Commission’s proposal
is fully Pringle-compatible, however,
is not straightforward. The proposal introduces a fundamental difference to the
ESMT that seems to go unnoticed in Commission’s explanations of the proposal.
It refers to the objective of the EMF and the conditions for offering
assistance. Currently, under Arts 3(2) and 12 ESMT, assistance is possible “if
indispensable to safeguard the financial stability of the euro area as a whole
and of its Member States”. According to the Commission’s proposal, however, the
EMF can provide assistance if “indispensable to safeguard the financial
stability of the euro area or of its Members” (emphasis added). Deleting the
phrase “as a whole” (in Art. 12) and replacing “and” with “or” (in Arts 3(2)
and 12 of the proposed Statute) means that a crisis that threatens the
stability of a single Member State but not the euro area as a whole can (and
shall) prompt action from the EMF. This is a very important shift of focus from
Eurozone to the Member States.

This change needs to be assessed
in light of the judgment of the CJEU in Pringle and the spirit of Art. 136(3)
TFEU. In paras 136 and 142 of Pringle,
the Court follows para. 5 of the ECB
Opinion on the draft amendment to Art. 136 TFEU, presenting as condition of
financial assistance that such assistance is indispensable for the euro area’s
stability. Moreover, Art. 136(3) TFEU, although not directly applicable to the
Regulation proposal because EMF will be a Union body, expresses the same
central idea: an assistance mechanism may be established with the objective to
offer assistance “if indispensable to safeguard the stability of the euro area
as a whole.”

Control by the Council and the European Parliament

Under the proposal, the EMF is a
“unique body of EU law”, independent, and governed by its own Board of
Governors and Board of Directors. In order to be compatible with the Meroni
principle (the EU law principle which limits the delegation of powers), Art.
3(1) of the proposed Regulation requires that the Council is responsible for approving
a series of important decisions of the EMF Board of Governors and Board of Directors. The Council approves these
decisions following the qualified majority rules provided in Art. 238(3) TFEU.

This arrangement creates two
complications. First, the majority required for Council approval is different
from that envisaged in Art. 4 EMF Statute both in terms of the necessary
thresholds and the basis for their calculation. Art. 238(3) TFEU requires 55%
of the members of the Council representing the participating Member States,
comprising at least 65% of the population of these States while Art. 4 EMF
Statute requires 85% of voting rights that are equal to the number of share
allocated to it in the authorised capital stock of the EMF. It is thus legally
possible that a decision that has the support of 85% of voting rights/shares is
not backed by the minimum of 11 Member States required in the Council. Second,
the Council approval makes the Council, an institution of the whole of the EU,
responsible (also judicially) for the decisions of the EMF, a body of the euro
area.

Moreover, the proposed Regulation
claims to make the EMF accountable to the European Parliament. The EMF is
required to submit reports, respond to oral and written questions, and accept
invitations to its Managing Director. There are two difficulties with such an
accountability scheme. First, these are only reporting obligations and do not
allow the Parliament any influence in the actual decision-making of the EMF.
Second, the European Parliament may not be an adequate forum for EMF
accountability purposes in the first place. Members of the EMF are only euro
area Members, but in the European Parliament and the Council all EU Member
States are being given seats, not only those that have adopted the euro. The
EMF is thus made accountable to institutions with a different composition than
the Members that provide for its capital.

Is Art. 352 TFEU a sufficient legal basis?

The Commission suggests as legal
basis of the proposed EMF Regulation the flexibility clause of Art.
352 TFEU. Art. 352 TFEU allows the Council to adopt measures when Union
action is necessary to attain one of the objectives set out in the Treaties and
the Treaties have not provided the necessary powers in other provisions. The
latter condition is easily met in this case. In Pringle, the CJEU ruled that the Treaties, and Articles 2(3), 5(1),
122(2), and 143(2) TFEU in particular, do not contain an appropriate legal
basis for the establishment of a stability mechanism. Moreover, the objective
of the EMF, namely to ensure the financial stability of the euro area, does
fall within the Union objective to establish an economic and monetary union.

The critical question for the
applicability of Art. 352 TFEU is whether the establishment of the EMF is also
“necessary” to attain those objectives. Here, the picture gets more
complicated. Since the establishment of the ESM in 2012, the Eurozone disposes
of a financial assistance mechanism to assist Members in distress and to
safeguard Eurozone stability. That might mean that the establishment of the EMF
by means of a Regulation is not any more necessary. In order to satisfy Art.
352 TFEU, what needs to pass the necessity test is not the existence of an
assistance fund – such a fund already exists; it is rather the integration of the fund in the EU framework
that the Commission must prove to be necessary. This is a more difficult test
for the EMF proposal.

A final issue with regard to Art.
352 TFEU has to do with the extension of Union competences. In its Opinion
2/94, the CJEU has ruled that Art 352 TFEU “cannot serve as a basis for
widening the scope of [Union] powers beyond the general framework created by
the provisions of the Treaty as a whole and, in particular, by those that
define the tasks and the activities of the [Union].” The question in this
context is whether a future EMF – a Union body – that employs “strict
conditionality” to its funding programmes goes beyond the allocation of powers
the Union, which in the field of economic policy has simply coordinating
competences. The Eurozone experience shows that this is possible. The
macroeconomic conditions that have been tied to financial-assistance packages since
the beginning of the crisis seem to go beyond coordination in intensity and
beyond EU competences in breadth. As long as ESM was an intergovernmental
organization this did not pose such critical competences question – although it
has been raised with regard to the Two Pack reforms. This critical question,
which goes directly into the question of the extent to which the Treaties allow
a real economic Union, will need to be revisited if the EMF plans succeed.

Monday, 29 January 2018

Dr Maria Tzanakopoulou, Teaching Fellow, King's
College London and University College London

BACKGROUND

The
gig economy is on the rise precipitating much discussion about working
conditions –from working time to remuneration and from maternity and paternity
protection to the all important classification of individuals working in the
gig economy pool (see, eg, here
and here).
The case of King
marks the debut of CJEU judgments related to the regulation of business conduct
and worker’s rights in the gig economy. Here, the CJEU upholds the right of a
self-employed worker to indeterminately carry over entitlements deriving from
unexercised paid leave, while it protects Mr King’s right to an effective
remedy before the courts. The story continues with the Court’s much debated Uber
decision (discussed here),
which reportedly blows in the face of businesses and becomes a stepping stone
to more comprehensive protection of the gig economy worker (here).
Perhaps somewhat surprisingly for those familiar with the Court’s often
dismissive approach to labour rights (see, eg, here), the CJEU
now seems, at least at first sight, reluctant to leave the gig economy
unregulated and to turn its back on gig economy labour forces.

Very
briefly, the Court in Uber classifies
the company as a provider that ‘offers urban transport services’ [para 38]
rather than as a mere intermediary between drivers and clients, as the company
itself maintains. The tangible effect of this decision is the subordination of
Uber to national regulatory measures. A less visible corollary of the case will
be Uber’s increased responsibilities towards its drivers. The case of King, touching as it does upon the
crucial matter of paid leave, has a more visible effect on workers. So much so,
that the press was quick to present the decision as a breakthrough for gig
economy workers at large (here).
However, the extent to which the case makes headway in bringing gig economy
workers as a whole under the protective ambit of employment rights is a matter
that is not entirely straightforward.

FACTS

Mr
King worked as a salesman for a company installing doors and windows (SWWL)
from 1999 until his dismissal, brought into effect on the day of his 65th
birthday, in 2012. According to his contract, a self-employed commission-only
contract, Mr King was paid on the basis of the sales he concluded. His right to
paid leave was unclear, as the contract was silent on that matter. In his Opinion,
AG Tanchev reports that Mr King was in the meantime offered an employee
contract, which would bring him into the sphere of full-blown worker
protection, but he opted for carrying on his work on a self-employed basis. (Mr
King later objected that the AG misunderstood the particular incident, but we
lack further clarification, as the Court did not consider it necessary to
reopen the oral procedure for what it apparently saw as a matter of secondary
importance.)

Upon
his dismissal in 2012, Mr King brought his case to the Employment Tribunal. Mr
King succeeded in his claims that the dismissal was grounded upon
discrimination on the basis of age and that he satisfied the definition of
‘worker’ for the purposes of the UK Working Time
Regulations, implementing Directive 2003/88
(the ‘working time Directive’. The Employment Tribunal further found that Mr
King was entitled to recover the sum of his untaken paid leave for his final
year with SWWL, as well as the sum amounting to holiday he had taken from 1999
until 2012 and which had remained unpaid throughout his thirteen years of work.

So
much remained undisputed by SWWL. However, the Employment Tribunal’s final
finding, namely that Mr King was further entitled to recover the sum for any
leave not actually taken during his work with SWWL, was appealed to the Employment
Appeal Tribunal (‘EAT’). The latter accepted the appeal and passed the case
back on the Employment Tribunal for reconsideration. According to the EAT’s
line of argument, King would have to first take (unpaid) leave and subsequently
raise a claim related to payment of that leave. This finding was primarily
based on Regulation 13(9) of the domestic implementing legislation, which
establishes that leave can only be taken in the relevant leave year and, if
not, it cannot be replaced by payment in lieu, unless employment has been
terminated. Regulation 30 further establishes that ‘[a] worker may present a
complaint to an employment tribunal that his employer’ has either not allowed
him annual leave or ‘has failed to pay him the whole or any part of any amount
due to him’ in respect of annual leave. Logically then, failure to pay shall
precede any complaint presented. The time limit for the complaint, laid down in
Regulation 30(2)), is set at three months after the claim arises or at whatever
period the tribunal considers appropriate where ‘it was not reasonably
practicable for the complaint to be presented’. When that complaint is not
presented in time then any entitlement, and in this case Mr King’s entitlement,
shall be lost.

Mr
King was of a different opinion. As failure to take annual leave was a direct
result of his employer’s refusal to pay, the relevant rights were carried over
from year to year until his termination of employment. His claim was therefore
brought in time.

The EAT’s
decision was, thus, appealed to the Court of Appeal, which referred five
questions, of both a procedural and a substantive nature, to the CJEU. In a nutshell,
the Court of Appeal asked whether the ‘use it or lose it’ approach of the Regulations
is compatible with the right to an effective remedy. The question targeted the
EAT’s interpretation that a worker can bring a complaint only upon taking leave,
which the employer refuses to pay. The Court further asked if the right to paid
leave carries over beyond the relevant leave year, in cases where non-exercise
of that right is caused by the employer’s refusal to pay. If so, how long does
that right carry over for?

THE COURT

The
CJEU commenced on its assessment by emphasising the social significance of the right
to paid leave. The Court was quick to bring the EU Charter of Fundamental
Rights into its reasoning, referring in particular to article 31(2), which lays
down the right to paid annual leave. The purpose of Directive 2003/88 read in
the light of the Charter is to allow the worker to enjoy annual leave under
conditions of remuneration comparable to those of working periods: the right to
paid leave cannot be ‘subject to any preconditions whatsoever’ [para 33]. If
leave itself or remuneration become uncertain as a result of the employer’s
conduct, then the right is in jeopardy.

On
the basis of the above, the CJEU rejected the EAT’s interpretation of the
Regulations as incompatible with the Directive: ‘in the case of a worker in a
situation such as that of Mr King, if the national remedies are
interpreted as indicated [by the EAT], it is impossible for that worker to
invoke, after termination of the employment relationship, a breach of
Article 7 of Directive 2003/88 in respect of paid leave due but not taken,
in order to receive the allowance referred to in paragraph 2 of that
article. A worker such as Mr King would thus be deprived of an effective
remedy’ [para 46]. As such, a complaint cannot be exclusively available after the
employer has refused to pay for a leave already taken. This is so, despite the
fact that the Directive itself is silent on remedies, not least because the
Charter enshrines the right to an effective remedy in article 47 [para 41].

With
respect to a worker’s ability to carry over paid annual leave rights, the Court
first recognised that Mr King did not exercise his rights for reasons beyond
his control. Whether or not Mr King was in the meantime offered employee status
was irrelevant for the CJEU, which looked at the worker’s status as it ‘existed
and persisted’ until retirement, whatever the reason for that status may be
[para 50]. According to the Court’s settled case law on absence due to sickness,
allowance in lieu should be available to those unable to exercise paid leave
rights for reasons beyond their control. However, a carry over limit of fifteen
months should be equally acceptable, given that the Court also has regard to ‘the
protection of employers faced with the risk that a worker will accumulate
periods of absence of too great a length and the difficulties in the
organisation of work which such periods might entail’ [para 55]. The question thus
came down to whether Mr King’s situation was comparable to absence due to
sickness.

The
Court here noted that ‘protection of [Mr King’s] employer’s interests does not
seem strictly necessary’ [para 59], especially in light of the need for the
right to paid leave to be interpreted broadly:

‘It
must be noted that the assessment of the right of a worker, such as
Mr King, to paid annual leave is not connected to a situation in which his
employer was faced with periods of his absence which, as with long-term
sickness absence, would have led to difficulties in the organisation of work.
On the contrary, the employer was able to benefit, until Mr King retired,
from the fact that he did not interrupt his professional activity in its
service in order to take paid annual leave’ [para 60].

The
Court concluded that ‘an employer that does not allow a worker to exercise his
right to paid annual leave must bear the consequences’ [para 63], which in this
case amounted to the sum due for all leaves untaken by Mr King over the years.

COMMENT

At
the outset, King is a case that gives
recognition to a significant employment right and should be welcome on that
ground alone. The Court did not shy way from stretching the outer limits of the
right to paid leave and fired straight at the employer. In symbolic terms, the
case seems equally interesting, with the CJEU’s diction hinting at a robust defence
of what the Court calls ‘EU social law’ against the interests of the employer.

Reliance
on the Charter as a leg-up in the Court’s broad interpretation of the right is
also interesting, albeit, I think, not necessarily decisive for this case. The
point of a purposive interpretation, like the one pursued by the Court here, is
precisely that it needs not rely on text (see here).
The Court could have decided much the same without the Charter’s assistance.
That said, the decision is a harsh message to businesses engaging freelancers
or generally workers that lack employee status.

Nevertheless,
the significance of King for gig
economy worker rights at large should not be overestimated. The grand scheme of
things suggests that, whereas workers in the gig economy can win the small
individual battles before the Court, the CJEU is unwilling to open up the way
to wide-ranging protection.

To
begin with, Mr King’s worker status was not under dispute, thus disburdening
the CJEU of examination of the personal scope of the right to paid leave. In
other words, the Court did not discuss applicability of that right to gig
economy workers as such. As the AG notes in his Opinion, the case was
effectively concerned with the essence, rather than the existence, of the right
[para 30]. In light of this, it could be argued that the Court’s primary concern
was to interpret the right and only at a secondary level to protect the gig
economy worker. Certainly, the specificities of the case, and of Mr King’s
situation, render this a consequential decision for many workers in the gig
economy. Nevertheless, the extent to which the relevant legislation will cover
a gig economy worker remains contingent upon each individual worker’s exact
employment status.

What
is perhaps more important is that, once King
is compared to the Court’s approach to collective labour rights in the gig
economy, the picture becomes even less promising.

Indeed,
the social dimension of employment rights emphasised in King appears to be neglected in cases dealing with collective
labour rights of the gig economy worker. It is now established case law of the
Court that collective bodies representing self-employed workers pursue an
economic activity and are therefore caught by the restrictive framework of competition
law rules (see Pavlov).
This is so, the Court has aegued, despite these bodies’ pursuit of a social
objective [Pavlov, para 118]. The
importance of Pavlov is put down not
to the specific facts of the case but to the Court’s refusal to invest a body
representing self-employed workers with equal protection as, eg, collective
bargaining agreements between employers and employees (see, eg, Albany).

On
the contrary, the Court has noted that ‘the Treaty contains no provisions (…)
encouraging the members of the liberal professions to conclude collective
agreements with a view to improving their terms of employment and working
conditions (…)’ [para 69]. Worse even, in the more recent FNW
Kunsten, the Court declared in unequivocal terms that ‘in so far as an organisation
representing workers carries out negotiations acting in the name, and on
behalf, of those self-employed persons who are its members, it does not act as
a trade union association and therefore as a social partner, but, in reality,
acts as an association of undertakings’ [para 28] and therefore falls within
the scope of competition law rules.

All
things considered, the Court appears to be adopting double standards. It is
ready to recognise the social significance of the right to paid leave of an
individual freelancer, yet it stops short of shielding the right of the
self-employed worker to collective bargaining.

One
way forward, then, would be for the Court to recognise individual rights
piecemeal, as in King. Another way
would be for individuals to rely on the courts, European or domestic, for an
inclusive approach to self-employed workers, as in Aslam.
Here, the worker status of Uber drivers, recognised by the Employment Tribunal
and upheld by the EAT, placed these individuals within the protective ambit of
the National Minimum Wage Act and the Working Time Regulations. Like Mr King,
the status of Uber drivers as workers for the purposes of these pieces of
legislation is now beyond dispute. It is, however, doubtful whether any of the
above would be able to negotiate their salary or pension through collective
bargaining free from the burden of EU competition law rules. A third way
forward would perhaps be for the CJEU to recognise the social significance of
bargaining rights and to guarantee them for gig economy workers. Only then, I
think, will it be justified to say that the war was won.

King
wins a battle but the war is ongoing: when an employment right can be defended
individually before the court, but not collectively in the field –even where
that right is upheld– I shall remain hesitant to ring victory bell for gig
economy workers.

Thursday, 25 January 2018

On Monday 29th January,
the EU Council is due to adopt its negotiating directives relating to the second
phase of Brexit talks, mainly concerning a transition period after Brexit Day
when substantive EU law will still apply to the UK. The apparently final version of those
negotiating directives has been leaked,
and so I have taken the opportunity to annotate them in detail. I will amend
this blog post if it turns out that the leaked draft is further amended when it
becomes final.

The EU27 position still has to be
agreed with the UK, of course. The UK set out its view on a transitional period
in the Prime Minister’s Florence speech last September, which I commented on here
and here.
There seem to be some broad areas of agreement between the two sides’
positions, but there will likely be some important differences of detail to
negotiate. Furthermore, phase 2 of the negotiations will build on from the partial
agreement on Brexit issues in December, which I discussed here
(as regards the acquired rights of EU27 citizens in the UK, and EU citizens in
the EU27) and here
(as regards other issues).

These negotiation directives
build upon the broader Phase 2 negotiation guidelines
which EU27 leaders (the ‘European Council’) adopted in December. They are also
based on a proposal
from the EU Commission in December, but the Council has changed some of the
Commission proposal. Where those changes are significant, I note what they are.

ANNEX

Supplementary directives for the
negotiation of an agreement with the United Kingdom of Great Britain and
Northern Ireland setting out the arrangements for its withdrawal from the
European Union

1. In line with the European
Council guidelines
of 29 April 2017 and the Council negotiating
directives of 22 May 2017, the first phase of the negotiations focused on
the rights of citizens, the financial settlement, the issues relating to the
island of Ireland, other separation issues, and the governance of the
Withdrawal Agreement.

2. Noting the progress made so
far, on 20 October 2017, the European Council called for work to continue with
a view to consolidating the convergence achieved and pursuing negotiations in
order to be able to move to the second phase of the negotiations as soon as
possible. The European Council thus invited the Council and together with the
Union negotiator to start internal preparatory discussions, including on
possible transitional arrangements.

3. Based on:

– the recommendation
made by the Commission Communication on the state of progress of the
negotiations with the United Kingdom under Article 50 of the Treaty on European
Union of 8 December 2017

– the Joint
Report from the negotiators of the European Union and the United Kingdom
Government on progress during phase 1 of negotiations under Article 50 TEU on
the United Kingdom's orderly withdrawal from the European Union of 8 December
2017, on which the Commission's recommendation is based,

the European Council, on 15
December 2017, welcomed the progress achieved during the first phase of the
negotiations and decided that it was sufficient to move to the second phase
related to transition and the framework for the future relationship.

4. The European Council also made
clear that negotiations in the second phase could only progress as long as all
commitments undertaken during the first phase were respected in full and
translated faithfully in legal terms as quickly as possible. During the second
phase of the negotiations, an overall understanding on the framework for the
future relationship of the Union with the United Kingdom should also be
reached. For that purpose, the European Council decided that it would adopt
additional guidelines on this framework in March 2018 and called for further
clarity on the United Kingdom’s position on the framework for the future
relationship.

5. The present set of negotiating
directives supplements the first set of negotiating directives adopted on 22
May 2017. The European Council guidelines of 29 April 2017 as well as the
general principles and the procedural arrangements for the conduct of the
negotiations established in the Council negotiating directives of 22 May 2017
continue to apply in their entirety to this phase of the negotiations,
including as regards the territorial scope of the withdrawal agreement,
including its provisions on transitional arrangements, and of the future
framework; these negotiating directives should therefore, as the first set of
the negotiating directives, fully respect paragraphs 4 and 24 of the European
Council guidelines of 29 April 2017, notably as regards Gibraltar.

Note that this refers to a Spanish veto on any post-Brexit arrangements
on the relationship between Gibraltar and the EU.

6. During the second phase of the
negotiations, in view of the unique circumstances and specific nature of issues
related to the island of Ireland, the work on detailed arrangements required to
give effect to the principles and commitments set out in the Joint Report
should continue in a distinct strand.

Note: the final version drops the following words proposed by the
Commission: ‘…some of which would be translated in the Withdrawal Agreement,
others in the framework for the future relationship.’ The original wording meant
that some issues related to Ireland would definitely be addressed as
post-Brexit issues. Dropping this wording suggests that they will either be
fully addressed in the withdrawal agreement, or leaves the issue open. In
practice it will be difficult to address them all in the withdrawal agreement,
since they are unavoidably closely linked to the future relationship. The words
‘unique circumstances’ were also added. I discussed the issues relating to the
Irish border, as set out in the December joint report, here.

6.a Since the arrangements
applicable to relations between the Union and the Sovereign Base Areas in
Cyprus will continue to be defined within the context of the Republic of
Cyprus’ membership of the Union, appropriate arrangements should be determined
during the negotiations as necessary, to achieve the objectives set out in
Protocol 3 to the Act of Accession of the Republic of Cyprus to the Union.

This entire paragraph was added.

I. ISSUES RELATED TO THE ORDERLY
WITHDRAWAL OF THE UNITED KINGDOM FROM THE EUROPEAN UNION

7. In line with the European
Council guidelines of 15 December 2017 and with the negotiating directives
annexed to the Council Decision of 22 May 2017 as supplemented by these
negotiating directives, it is necessary to complete the work on all withdrawal
issues, including those not yet addressed in the first phase. These include –
without being confined to – issues such as the governance of the Withdrawal
Agreement, intellectual property rights, ongoing public procurement procedures,
customs-related matters needed for an orderly withdrawal from the Union, protection
of personal data and use of information obtained or processed before the
withdrawal date.

The entire second sentence was added by the Council. Commission
negotiation papers on these subjects can be found here.
Note that there was partial agreement on some of the ‘winding up’ issues in the
December joint report, as I discussed here.
Technically there is no need to include these issues in the withdrawal
agreement if the UK is going to continue applying the status quo of EU
membership for awhile; they could be addressed as part of ending the transition
period. But the EU27 side seems keen to wrap them up now. The governance issues
include dispute settlement, where the exact role of the ECJ will be difficult
to agree.

8. Negotiations in the second
phase should furthermore translate into clear and unambiguous legal terms the
results of the negotiations, including those obtained during the first phase,
which should, where appropriate, be adapted in the light of the existence of
the transitional arrangements referred to below. In particular, the provisions
of the Citizens' rights part of the withdrawal agreement should apply as from
the end of the transition period. The 'specified date' referred to in paragraph
8 of the Joint Report should consequently be defined as that of the end of the
transitional period.

The words ‘clear and unambiguous’ and the entire second and third sentences
were added by the Council. The following sentence, proposed by the Commission,
was dropped: ‘As specified in the first set of the negotiating directives, the
Withdrawal Agreement should recall that Union law ceases to apply on the
withdrawal date to the overseas countries and territories having special
relations with the United Kingdom and to the European territories for whose external
relations the United Kingdom is responsible, to which the Treaties apply by
virtue of Article 355 of the Treaty on the Functioning of the European Union.’

This paragraph emphasises the importance of drawing up a formal legal
text of the withdrawal agreement. When and if agreed and ratified, that text
will be the decisive legal basis for the UK/EU27 withdrawal process – not negotiation
documents like these. The position that the cut-off date for acquired rights of
EU27 citizens in the UK/UK citizens in the EU27 will be the end of the transition
period reflects the prior view of the Commission. The UK side may well object
to this.

I discussed the citizens’ rights provisions of the joint report in more
detail here.
As I noted, while some issues have been agreed in detail, some points – like the
freedom of UK citizens in one Member State to move to other Member States –
were left for further discussion.

II. TRANSITIONAL ARRANGEMENTS

9. The European Council guidelines
of 29 April 2017 set out general core principles applying to any agreement with
the United Kingdom as well as to any transitional arrangements:

– any agreement will have to be
based on a balance of rights and obligations, and ensure a level playing field;

– preserving the integrity of the
Single Market excludes participation based on a sectorby-sector approach;

– a non-member of the Union, that
does not live up to the same obligations as a member, cannot have the same
rights and enjoy the same benefits as a member;

– the four freedoms of the Single
Market are indivisible and there can be no "cherry picking";

– the Union will preserve its
autonomy as regards its decision-making as well as the role of the Court of
Justice of the European Union. According to the European Council guidelines of
15 December 2017, this refers notably to the competence of the Court of Justice
of the European Union.

10. In addition to these core
principles, the European Council guidelines of 29 April 2017 set out specific
conditions applicable to any possible transitional arrangements. To the extent
necessary and legally possible, the negotiations may seek to determine
transitional arrangements which are in the interest of the Union and, as
appropriate, to provide for bridges towards the foreseeable framework for the
future relationship in the light of the progress made. As reiterated by the
European Council Guidelines of 15 December 2017, any such transitional
arrangements must be clearly defined, and precisely limited in time. They must
also be subject to effective enforcement mechanisms.

11. These supplementary
negotiating directives are based on and further develop the principles and
conditions laid down in the European Council guidelines of 15 December 2017.

12. In line with those
guidelines, which further specify and develop the core principles laid out in
the European Council guidelines of 29 April 2017, any transitional arrangements
provided for in the Withdrawal Agreement should cover the whole of the Union
acquis, including Euratom matters. Notwithstanding paragraph 17 of these
negotiating directives, the Union acquis should apply to and in the United
Kingdom as if it were a Member State. Any changes to the Union acquis should
automatically apply to and in the United Kingdom during the transition period.
For acts adopted in the Area of Freedom, Security and Justice by which the
United Kingdom is bound before its withdrawal, Articles 4a of Protocol (No 21)
and 5 of Protocol (No 19) annexed to the Treaties, which allow the United
Kingdom not to participate in an act amending a measure by which it is already
bound, should continue to apply during the transition period including the
possibility for the Union to determine that this non participation would make
the relevant measure inoperable and therefore that the measure should cease to
apply to the United Kingdom. The United Kingdom should however no longer be
allowed to opt-in to measures in this Area other than those amending, replacing
or building upon the above mentioned existing acts.

As for the application of new EU laws, there will be a slowdown in EU
legislative activity between about May and December 2019 due to the European
Parliament elections and the changeover of the Commission. Many measures
adopted afterward won’t apply to the UK anyway, if the transitional period ends
as proposed at the end of 2020, because Directives usually have a two-year
deadline to implement them and the main focus will be on adopting new funding
legislation, which won’t apply until after 2020 either. Note that the UK will
lose the right of veto which has it has now in areas such as tax and foreign
policy rules. However, the December joint report noted that the UK would not be
bound by changes to the basic laws on revenue and spending – so the UK will
keep its budget rebate until the end of 2020.

The legalese on the ‘Area of Freedom, Security and Justice’ means that the
UK will still be able to opt in to new EU legislation on EU asylum, criminal
law or policing, but only on the condition that such legislation amends
existing EU legislation. (In most cases, it does). Where such legislation is entirely
new, ie not amending existing law, the UK loses the right to opt in, and will
not be bound. The current rule that the UK can be ‘thrown out’ of existing laws
in this area if it does not opt in to measures amending those existing laws
will still apply. (That power has not been used to date).

13. During the transition period,
Union law covered by these transitional arrangements should deploy in the
United Kingdom the same legal effects as those which it deploys within the
Member States of the Union. This means, in particular, that the direct effect
and primacy of Union law should be preserved.

The final sentence was added by the Council. This means that the
current rules on the legal effect of EU law in the UK domestic legal systems
would not be changed during the transitional period. The UK has previously
agreed to this as regards acquired rights of EU27 citizens, as I discussed here.

14. During the transition period,
and in line with the European Council guidelines of 29 April 2017, the United
Kingdom will remain bound by the obligations stemming from the agreements
concluded by the Union, or by Member States acting on its behalf, or by the
Union and its Member States acting jointly, while the United Kingdom should
however no longer participate in any bodies set up by those agreements.

The Council replaced the words ‘will no longer benefit from’ with ‘will
remain bound by the obligations stemming from’. It also deleted the words ‘Where
it is in the interest of the Union, the Union may consider whether and how
arrangements can be agreed that would maintain the effects of the agreements as
regards the United Kingdom during the transition period’.

The intention seems to be that the UK will still have obligations to the
EU to apply agreements concluded with non-EU countries by the EU (or the EU
jointly with its Member States). However, since the withdrawal agreement cannot
bind non-EU countries, those non-EU countries will no longer have obligations
to the UK, unless they agree with the UK to continue their existing obligations
in force. The negotiation of treaties between the UK and non-EU countries is
the subject of the next paragraph.

15. In line with the European
Council guidelines of 15 December 2017, any transitional arrangements require
the United Kingdom's continued participation in the Customs Union and the
Single Market (with all four freedoms) during the transition. The United
Kingdom should take all necessary measures to preserve the integrity of the
Single Market and of the Customs Union. The United Kingdom should continue to
comply with the Union trade policy. It should also in particular ensure that its
customs authorities continue to act in accordance with the mission of EU
customs authorities including by collecting Common Customs Tariff duties and by
performing all checks required under Union law at the border vis-à-vis other
third countries. During the transition period, the United Kingdom may not
become bound by international agreements entered into in its own capacity in
the fields of competence of Union law, unless authorised to do so by the Union.

The final sentence was added by the Council. This paragraph ensures no
change in the application of the single market or the customs union to the UK
during the transitional period. The limit on the UK’s power to enter into
treaties raises questions. This only applies if such treaties are within the EU’s
fields of competence; but for EU members there is complex external relations case
law of the ECJ which states when they can sign treaties even within areas of
law that the EU could also sign treaties in. It is not clear if the intention
is to replicate that case law, or rather to subject to the UK to more
constraints than it would have as a Member State.

For the UK side, the key point may be whether it is free to negotiate
and sign treaties within the transitional period, even if those treaties only
come into force afterward. The negotiation directives are silent on this issue.
The UK might also reasonably argue that simply replicating its existing rights and
obligations in a new treaty with a non-EU country should be approved by the EU,
or should not need EU approval at all.

16. In line with the European
Council guidelines of 29 April 2017 and the first set of negotiating directives
of 22 May 2017, any time-limited prolongation of the Union acquis requires
existing Union regulatory, budgetary, supervisory, judiciary and enforcement
instruments and structures to apply, including the competence of the Court of
Justice of the European Union.

17. In relation to the
application of the Union acquis to the United Kingdom, the Withdrawal Agreement
should therefore, during the transitional period, preserve the full competences
of the Union institutions (in particular the full jurisdiction of the Court of
Justice of the European Union), bodies, offices and agencies in relation to the
United Kingdom and to United Kingdom natural or legal persons. In particular,
Union institutions, bodies and agencies should conduct all supervision and
control proceedings foreseen by Union law. In line with the European Council
guidelines of 15 December 2017, the United Kingdom will however no longer
participate in or nominate or elect members of the Union institutions, nor
participate in the decision-making or the governance of the Union bodies,
offices and agencies.

The second sentence was added by the Council. The text means that the
UK will not be part of the EU’s institutions (such as the Council, Commission, European
Parliament or EU court) but will still be subject to their decisions, as noted
above.

While the text refers to applying all of the current powers of the ECJ,
in practice the EU27 side previously agreed to more limited powers for the ECJ
as regards citizens’ rights, as I discussed here.

18. During the transition period,
as a general rule, the UK will not attend meetings of committees referred to in
Article 3 (2) of Regulation
(EU) No 182/2011 or Commission experts groups and other similar entities of
the agencies, offices or bodies where Member States are represented.
Exceptionally on a case-by-case basis, the United Kingdom could be invited to
attend without voting rights such meetings:

– where the discussion concerns
individual acts to be addressed to the United Kingdom or to United Kingdom
natural or legal persons; or

– where the presence of the
United Kingdom is necessary from a Union perspective for the effective
implementation of the acquis during the transition period.

The Regulation referred to sets out general rules on control of the
Commission when it adopts measures implementing EU legislation.

19. The Withdrawal Agreement
should define the precise conditions and the clear framework under which such
exceptional attendance should be allowed.

20. Specific consultations should
also be foreseen with regard to for the fixing of fishing opportunities during
the transition period, in full respect of the Union acquis.

21. The transition period should
apply as from the date of entry into force of the Withdrawal Agreement and
should not last beyond 31 December 2020.

This date is convenient for the EU27 side as it coincides with the end
of the current multi-year budget cycle. There is no reference to any possible
extension of the transitional period, and paragraph 10 states that the period
should be ‘precisely limited’ in time. Any idea that the period should be
extended indefinitely could potentially spark legal challenges. It would be
possible to sign a new agreement post-Brexit that would extend the transitional
period, but this would surely require unanimous agreement and possibly also national
ratification in part.

Monday, 22 January 2018

Professors Elspeth Guild, Queen Mary University of London and Kingsley Napley,
and Steve Peers, University of Essex

What happens if a non-EU citizen
has a residence permit from one Member State, but another Member State wants to
expel him? The Court of Justice addressed this issue for the first time in its ruling
last week in the case of E.

Background

This issue is complicated because
there are two different relevant sources of EU law, which have not been linked
very clearly. First of all, Article 25 of the Schengen Convention, as amended
in 2010, states that if a Member State considers issuing a residence permit or
long-stay visa, it shall search the Schengen Information System (SIS), which
(among other things) contains a list of non-EU citizens banned from entry into
the EU. Each listing is called an ‘alert’. If there is an alert on the person
concerned, the Member State that wants to issue the residence permit or
long-stay visa shall consult the Member State which issued the alert and ‘take
account of its interests’, granting a residence permit or or long-stay visa only
for ‘substantive reasons…notably on humanitarian grounds for by reason of
international commitments’. If a residence permit or long-stay visa is issued,
the alert in the SIS must be withdrawn, but the Member State which issued it
can keep the person concerned on a national list of alerts. There’s also an
obligation to check national records of long-stay visas or residence permits
before issuing alerts.

A similar rule applies the other
way around: if it turns out that an alert has been issued for a non-EU citizen
who holds a residence permit or long-stay visa from another Member State, the
Member State which issued the alert must consult the Member State which issued
the residence permit or long-stay visa, to see if there are ‘sufficient
reasons’ for withdrawing the permit. In these cases there is more discretion
for the State which had already granted residence: there is no threshold to
justify continuing the residence permit in force. If the residence permit or
long-stay visa is not withdrawn, again the State issuing the alert must
withdraw it from the SIS, but can keep the person on a national list of people
banned from entry. It’s this second rule which was at issue in the E case.

But the Schengen rules concern
only SIS alerts based on entry bans, not the issue of expulsion or the entry
bans as such. Those issues are dealt with by the Returns
Directive, which in principle requires Member States to expel non-EU
citizens who are present irregularly. Usually they must be expelled to non-EU
countries, but there’s an exception if they have a residence permit or other
right to stay issued by a Member State. In that case they must go to that other
Member State immediately. If they don’t comply, or if their immediate departure
‘is required for reasons of public policy or national security’, then they can
be expelled directly to a non-EU country.

The Returns Directive also
requires Member States to issue EU-wide entry bans in many cases where
expulsion decisions have been issued. However, it does not expressly set out the
obvious implication that this means an alert must be issued in the SIS. A Commission
proposal
from 2016 fills this gap. That proposal also incorporates the current rules on
consultation where there is a conflict between an alert and a residence permit
or long-stay visa, with some amendments. This proposal is likely to be agreed
soon, as both the European
Parliament and the Council
adopted their negotiation positions on it late last year. A parallel proposal
on use of the SIS at borders would also regulate the link between the Returns
Directive and the SIS in its Article 24, and furthermore repeal Article 25 of
the Schengen Convention. It remains to be seen whether the recent judgment might
impact the discussions of the legislators on these proposals.

The Facts

A Nigerian national, E, who held
a valid residence permit issued by Spain and had lived there for 14 years (and
had family ties there) was convicted of a narcotics offence in Finland and
sentenced to five years imprisonment (subsequently commuted to a suspended
sentence). The Finnish authorities ordered E’s immediate expulsion to Nigeria
on grounds of public order and national security together with an entry ban on
his return. In accordance with their obligations under Article 25 of the
Schengen Convention, the Finnish authorities contacted their Spanish
counterparts to consult on whether there were sufficient reasons to withdraw
the residence permit. The Spanish authorities did not respond.

On a second request by the
Finnish authorities, their Spanish counterparts asked for a copy of the judgment
convicting E (which the Finnish authorities sent). Thereafter, and following
two unsuccessful attempts to consult the Spanish authorities, it seems that the
Finnish authorities sought to carry out their order. In the meantime, E became
irregularly present in Finland as he had stayed there more than 90 days out of
the previous 180, which is the limit on movement of non-EU citizens (including
those holding a residence permit from another Member State) under the Schengen
system.E appealed and the Finnish
Supreme Administrative Court stayed the proceedings and asked the Court of
Justice to clarify whether Article 25 CISA permits the expulsion to Nigeria of
E without the completion of the mandatory consultations with the Spanish authorities.

The issue was complicated by the
fact that Article 25 of the Schengen Convention on its face is designed to
resolve conflicts between Member States regarding conflict between residence
permits and SIS alerts. There is no obvious place for the individual in the
process. So the Finnish court also asked whether E could rely on Article 25
CISA at all.

The Court’s reasoning

The first question the Court had
to resolve was when consultations between States must take place. The Court had
regard to the objective of Article 25 of the Schengen Convention. In its view
this objective is ‘to avoid a contradictory situation in which a third-country
national is both holder of a valid residence permit issued by a Contracting
State and the subject of an alert for the purposes of refusing entry in the
Schengen Information System’ (para 38). This objective must be read in conjunction
with the principle of loyal cooperation in Article 4(3) TEU which means,
according to the Court, that the consultation procedure should be initiated as
quickly as possible (para 39). For this reason, the Court found that when a
state is contemplating issuing an expulsion decision and entry ban on a third
country national holding a valid residence permit from another Member State,
the consultation should start as soon as possible and does not need to be
delayed until a SIS alert has been made.

The Court decided the third and
fourth questions together – rephrasing them as the issue of the failure to
respond by the authorities of another Member State and what if any inferences
the expelling Member State is entitled to draw as a result.The first thing the Court noted is that the
Schengen system only applies to short visits of 90 days out of every 180.
Residence permits on the other hand are issued mainly under national law (para
41 – surprising considering how much of EU migration law has been made subject
to Directives). As noted above, the Returns Directive in principle requires
Member States to expel all non-EU citizens who are not (or no longer) lawfully
present, but where the person concerned has a valid residence permit in another
Member State, he or she must be entitled to travel to the Member State which
issued the residence permit. He or she cannot be expelled to a third country
(or his or her country of origin), except where he or she fails to return to
the other Member State, or on grounds of national security or public policy
(para 45).

So how to interpret the latter
exception? The Court reminded the Finnish authorities that in determining
whether a third country national is a public policy or national security risk,
the ‘Member State is required to assess the concept of ‘risk to public policy’,
within the meaning of Article 7(4) of Directive 2008/115 on a case-by-case
basis, in order to ascertain whether the personal conduct of the third-country
national concerned poses a genuine and present risk to public policy, bearing
in mind that the mere fact that that national has been criminally convicted is
not sufficient by itself to present such a risk’ (para 49). This refers to a
prior judgment on the voluntary departure rules in the Returns Directive,
discussed here;
it’s striking that there’s a high threshold to apply the ‘public policy’ clause.

Clearly, although the facts are a
matter for the national court, the EU Court possibly had doubts about whether
the conviction of E met the requirements for expulsion to a non-EU country. The
Court acknowledged that the Finnish authorities could issue an alert (entry
ban) against E but they would have to withdraw it if the Spanish authorities
did not withdraw E’s residence permit. The Court recognised that the Spanish
authorities had failed to respond to the requests of their Finnish counterparts
in a reasonable period of time. But the consequences of that failure are not
meted out on the individual. Instead the Court held that so long as the
residence permit had not been withdrawn, irrespective of the failure of the
Spanish to comply with their duties under the consultation procedure, the
Finnish authorities are under an obligation to withdraw their alert to stop
re-entry. At that point the Finnish are free to put the third country
national’s details on their own national alert system to prevent re-entry into
Finland, but this does not have EU wide consequences. (Note that the proposed new
legislation on returns and the SIS would set a deadline to reply to
consultation requests, but would still not expressly determine what happens if
the Member State does not reply in time).

Finally, the Court addressed the
first question – could E rely on the provisions of the Schengen Convention to
prevent his expulsion to Nigeria, or are those provisions only legally binding
(and accessible) to States? The Court found in favour of E – he is entitled to
rely on the consultation procedure which gives rise to legal effects of
importance to him (para 57). The reasoning of the Court was that as the
consultation procedure is set out in a clear, precise and unconditional manner
it is capable of giving rise to rights for individuals. Further, if in the
consultation procedure, the state which issued the residence permit decides to
maintain it, that also gives rise to a clear, precise and unconditional
obligation on the expelling Member State to withdraw any alert to prevent
re-entry into the Schengen area which it may have put in place (though it can
keep a national re-entry ban in place) (para 59).

Commentary

This is a very interesting, if
rather complex case. Three things are worth noting from it. First, as the Court
has done in the case of the Dublin
III Regulation, it has found that administrative provisions of EU laws which
govern what states are supposed to do with people produce legal effects on
which the affected people may rely. The individual can rely on EU law even
where it is written in terms of inter-state procedures. The requirement is the
same as that for direct effect – the provision must be clear, precise and
unconditional.

Secondly, the Court gives
priority to the residence permit which has not been withdrawn over the
expulsion decision and entry ban. So long as a Member State does nothing to
withdraw a residence permit, another Member State cannot expel outside the
Union the third country national except on limited grounds (but can oblige him
or her to go to the Member State which issued the residence permit). It does
not matter that the Member State which issued the residence permit has failed
to comply with the rules on consultation.

Thirdly, the complex intersection
of the Schengen Convention, an agreement among Member States originally outside
the scope of EU law and only integrated in an incomplete manner by the
Amsterdam Treaty in 1999, and EU law proper – the regulations and directives –
moves in the direction that the EU adopted measures are gradually replacing the
provisions of the Convention. There is no ‘backward’ movement whereby Member
States can ‘recover’ flexibility under the Convention which has been ruled out
by subsequent EU law provisions. Indeed, this judgment demonstrates that EU law
principles have prevailed over the intergovernmental nature of the Schengen
Convention, not the other way around.

Tuesday, 16 January 2018

There is no sign that the UK
government (or indeed the opposition Labour party) is considering revoking the
UK’s notice of withdrawal from the EU, or that either would be interested in
asking the British public to vote again on the question of EU membership. Yet,
sparked by the latest attempt of Nigel Farage to draw attention to himself, the
prospect of a further Brexit referendum – which necessarily assumes that the
Article 50 notice is revocable in some way – continues to be a subject of
public debate.

In that context, and in light of
a new
European Parliament report on this issue, here’s an argument from Professor
Stephen Weatherill arguing that the Article 50 notice cannot be unilaterally
revoked – with the contrary argument from Professor Steve Peers.

Why the withdrawal
notification under Article 50 TEU is not unilaterally revocable

Professor Stephen Weatherill, Somerville College and Law
Faculty, University of Oxford

The recently published European
Parliament paper entitled ‘The (ir-)revocability of the withdrawal notification
under Article 50 TEU’ addresses an issue that may come to have very sharp
significance in determining the options and directions taken in the unfolding
Brexit circus. As its title suggests, the paper inquires into the question
whether the withdrawal notification under Article 50 TEU is revocable or irrevocable,
and, most poignant of all, it asks whether that withdrawal notification is
unilaterally revocable. This will matter a lot should the UK repent of its
decision to leave the EU. I argue here that the notification is not
unilaterally revocable.

The paper, authored by Ioannis
Papageorgiou of the Parliament’s Policy Department for Citizens’ Rights and
Constitutional Affairs, takes as its obvious starting-point that Article 50 TEU
does not explicitly address the revocation of a withdrawal notification. It
also notes that ultimately it is the Court of Justice that will provide an
authoritative ruling, should it be provided with the opportunity (pages 6, 22).
I agree. It observes that ‘Given the fact that Article 50 does not make any
reference to revocation issues, both sides of the argument can be defended’
(pages 16, 21). I agree. It treats the Vienna
Convention on the Law of Treaties as irrelevant, mainly because it is in
the nature of the evolved EU legal order that answers are to be found within
the EU system alone, as a self-contained system (pages 7-13, 24, 27). I agree.
And the paper ably surveys both sides of the argument. At page 23 it is commented
that ‘Among UK scholars and politicians there is a predominant position that a
unilateral revocation is within the right of the UK’. I agree: there is such a
predominant position. The purpose of this note is to argue against that
predominant position.

Consider first matters of design
from the perspective of costs and incentives. A State that notifies an
intention to withdraw within the meaning of Article 50 TEU and then wishes to
change its mind has generated large costs. It has caused resources to be
allocated to the negotiations which it wishes to terminate which could have
been used for other purposes. To treat Article 50 TEU as capable of unilateral
revocation means that the costs incurred lie where they fall: the repentant
State covers its costs and the EU-27 (a term I use to denote the 27 member
States plus the EU institutions) covers its costs. That means that the State
that wished to leave, but which changed its mind, is able to externalise the
costs incurred by the EU-27 as a result of its decision. That in turn reduces
its incentives to make a full and careful calculation of the consequences of
its action before it issues the Article 50 notification.

By contrast an interpretation
which denies that the notification made pursuant to Article 50 TEU may be
revoked unilaterally, and which insists that instead revocation depends on the
agreement of the EU-27, ensures that as part of that negotiation the repentant
State may be required to meet the costs of its choices. It makes every sense to
ensure that costs are imposed on the party that is most able to reduce those
costs. That is the party that initiated the process in the first place by
notifying an intention to withdraw which it then wished to revoke – here, the
UK. As a general observation one may argue that it is a matter of simple
justice that the party that has generated the costs should pay for those costs
– more narrowly my argument here is that such an approach is desirable in order
to preclude a State from externalising the costs of its actions, and thereby
pushing it to consider fully in advance the costs involved. This militates in
favour of denying a unilateral right of revocation, and instead ensures that
revocation becomes part of a bargaining process within which costs can be allocated.

A separate strand in the debate
concentrates on democracy. Why should a State not be allowed to change its
mind? If – perhaps as a result of a fresh referendum, perhaps following an
election leading to a change of government – the people of that state have
clearly decided they wish to remain in the EU, why should Article 50 be
interpreted to thwart that expressed popular will?

This is a good argument in favour
of interpreting a notification pursuant to Article 50 to be revocable provided
there is political agreement among the repentant state and the EU-27. It is a
weak argument in favour of a unilateral right to revoke. A model that permits
unilateral revocation entails that some of the costs incurred are borne by
voters in the other Member States, albeit largely indirectly because they will
be swallowed up by the overall EU budget. So voters in Germany, Italy and
France and so on would be expected to pay for the consequences of decisions to
leave and then, after a change of mind, to remain taken by the UK although
those German, Italian and French voters have had no say at all, and can have no
say at all, in influencing those decisions.

Much of EU law is animated by the
concern that decisions taken at national level have cross-border implications
and that it is accordingly necessary to impose some discipline on the capacity
of states to inflict harm on each other: this is why free movement law and the
law governing State aids set limits to national regulatory autonomy. The rules
of the EU constrain State practices because those affected by such practices in
other Member States have no voice in the (national) political process that has
generated them. A unilateral right to revoke an Article 50 notification would
contradict this model. It would allow the revoking State to export costs to
other States. Treating the Article 50 notification as irrevocable by unilateral
act forces the parties to negotiate on the terms that shall attach to
revocation, and this in turn ensures that (directly or indirectly) all parties
which are affected by the preference to revoke have a say. In short, a
revocation does not affect only the UK and so should not lie within the power
of the UK alone.

The argument so far is normative:
based on concern to allocate costs in a way that maximises incentives to
account in advance for choices made and on concern to ensure a voice for all
affected parties, an Article 50 notification should be treated as incapable of
unilateral revocation. But this normative argument cannot prevail if the terms
of Article 50 contradict it. They don’t.

Article 50 is of course silent on
the question of revocation. So it is necessary to look at its structure and
purpose. A case in favour of unilateral revocation is a case which serves to
protect the flexibility enjoyed by the State which has issued a notification of
its intention to withdraw. But that is not in line with either the structure or
purpose of Article 50. Once the notification is made pursuant to Article 50,
the terms of that Treaty provision dictate that the pace and content of the
process is entirely subject to management by the EU-27 – which, to repeat,
covers the other 27 Member States and the EU institutions. After notification,
guidelines are provided by the European Council; the Union negotiates an
agreement with the withdrawing State; it is to be concluded on behalf of the
Union by the Council, acting by a qualified majority, after obtaining the
consent of the European Parliament; the Treaties cease to apply to the
withdrawing State from the date of entry into force of the withdrawal agreement
or, failing that, two years after the notification unless the European Council,
in agreement with the withdrawing Member State, unanimously decides to extend
this period; and Article 50(4) shuts the withdrawing Member State out of the relevant
discussions of the European Council and Council.

This is all about the way in
which the EU-27 shall act: it is not at all about the protection of the
withdrawing State. The primary concern which underpins Article 50 is to ensure
that, once a Member State has chosen to submit its notification of intention to
withdraw, the interests of the 27 Member States and the EU institutions then
come to the forefront and are protected. To find an extra unilateral right of
revocation enjoyed by the withdrawing State contradicts the structure and
purpose of Article 50.

A very concrete example serves to
emphasise the point. Were a withdrawing State to enjoy a right of unilateral
revocation, it would be in a position to give notice of withdrawal and then
change its mind after 23 months, once it concludes that the deal is not likely
to be good enough. In fact, on this approach, a State could even change its
mind after 23 months if it realises it is not going to get a good deal agreed
inside 24 months, revoke the notice of withdrawal, and then submit another
notice of withdrawal soon afterwards and try again. And it would not be liable
to account for the costs.

Hazy suggestions that this would
be an abuse of law are one answer to this problem – and for sure there would be
political costs for a State behaving in such a perfidious manner. But the
better solution, the one which is fully in line with the structure and purpose
of Article 50 itself, is simply to exclude the possibility of unilateral
revocation under Article 50. This interpretation also has the merit of
deterring a State from triggering Article 50 unless it is absolutely sure that
it wants to run the risks of getting a bad deal or even no deal – which, to
repeat, is in line with Article 50’s structure and purpose, which is to protect
the 27 not the 1. The government of a State that sends a notification pursuant
to Article 50 and then waits nine months before initiating internal discussions
on what shall be the preferred shape of its future relationship with the EU is
in a spectacularly bad position, but it is entirely its choice to have placed
itself in that location. There is nothing in the structure and purpose of
Article 50 which encourages the view it should be allowed a unilateral right of
revocation, thereby to impose costs on the EU-27 and to subvert the protections
for the EU-27 carefully spelled out by Article 50. Quite the reverse: Article
50 should not be treated as providing a unilateral right of revocation.

A final point in closing the door
to unilateral revocation is needed. Article 50 provides only for notification
of an ‘intention’ to withdraw. An intention, it may be argued, can change. So
can a Member State set aside its notification of an intention to withdraw on the
basis that subsequently it has changed its mind and so no longer has that
intention?This is an attractive
argument for those who would wish to maintain maximum flexibility for the UK.
But it is not convincing. The notification of an intention to withdraw has been
made. The clock starts to tick: the EU-27 acts in reliance on the notification
and begins to make preparations for the negotiation. The intention may change
subsequently, but the fact of having notified it within the meaning of Article
50 does not and cannot change. This attempt to create a right of unilateral
revocation based on subsequent change of intention places an undue strain on
the wording of Article 50, as well as running contrary to its structure and
purpose.

I do not here address the politics
of the matter. It is generally assumed that if the UK changed its mind a way
would be found to accommodate its preference to remain a Member State of the
EU. That may be right. But it may be complacent. If by the time of the change
of mind major employers have decided to quit the UK in favour of the EU-27
(which might be precisely the impulse most likely to trigger the UK to change
its mind) the incentives to agree to a UK request to terminate the Article 50
process would be weakened. Moreover, if the UK’s change of mind occurred amid a
febrile political environment within which an imminent fall of government and
its replacement by another minded to re-issue an Article 50 notification seemed
plausible, then the EU-27 might be tempted to let the withdrawal process run
its course.

My argument here is simply one of
legal interpretation, not political context. But the politics are in part
determined by the legal position. These political obstacles to the scope for
the UK to change its mind and remain a member of the EU vanish if it enjoys a
legal entitlement to revoke the Article 50 notification unilaterally. The UK
can resume its current position cost-free (save only for longer-term
reputational damage). By contrast if, as I argue, there is no right to unilateral
revocation of Article 50, the UK will need to overcome those obstacles, and as
part of that process it needs to negotiate on the terms to be attached to the
readiness of the EU-27 to acquiesce in the change of mind. That puts the UK in
a very weak position. It is the UK that has placed the UK in a very weak
position. The structure, purpose and wording of Article 50 show that the solace
of a unilateral right of revocation of the notification of withdrawal is not
available.

The case for
unilateral revocability of the Article 50 notice

Professor Steve Peers,
University of Essex

Any form of retreat from Brexit
seems unlikely, and any attempt at revoking the Article 50 notice would likely
be a political process first and foremost. Still, it’s useful to consider
whether unilateral revocability of an Article 50 notice is possible, in the
event that the political situation changes radically; and I agree with
Professor Weatherill that the legal position would have some relevance even
though the politics would take precedence. (Most importantly, the power to
revoke unilaterally would mean that the UK would not have to offer any quid pro quo in order to stay in the EU,
and so would change the dynamics of the process).

In my view, while there are legal
arguments for non-revocability and unilateral revocability, it’s hard to
see the legal (as distinct from political)
argument for ‘revocability only with consent’. And ultimately, while it’s
anyone’s guess how the ECJ might ultimately interpret Article 50 if the case
arose, my view is that the stronger argument is for unilateral revocability of
the withdrawal notice.

Let’s start with the case law of
the ECJ. There’s not yet any case law on Article 50 as such, of course, and so
any case law could only be loosely relevant by analogy. The only ECJ case in
the last few years I could find about a Member State revoking anything was this
asylum
law judgment of 2015, which as it happens I discussed at the time here.
This case in part concerns whether a Member State can revoke a refugee’s
residence permit, even though the relevant EU legislation contains no express
reference to such a possibility.

In the court’s view (see
paragraphs 47-50 of the judgment), ‘[d]espite the lack of express provision
authorising Member States…to revoke a residence permit issued to a refugee, a
number of arguments support an interpretation whereby Member States are allowed
to take such a measure’. First, the EU legislation ‘does not explicitly rule
out the possibility of revoking a residence permit’. Second, revocation of a
permit was ‘consistent with the aim of’ the legislative rule (because the law
says expressly that Member States could refuse to issue or to renew a residence
permit on grounds of national security, it made sense that they could revoke a
permit on such grounds). Thirdly, revocation was consistent with other
provisions of the law relating to potential national security concerns about
refugees.

Refugee law is different from the
EU withdrawal process, of course. But there are some general points here. First
of all, the Court rejects the argument (commonly made by those who think no revocation of the Article 50 notice
is possible) that ‘absence of an explicit clause on revocation must mean that
no revocation is possible’. Rather, the judges rule the opposite: if revocation is notexplicitly ruled out, then it must be
possible. Secondly, the aim of the
law is important. This is indeed the main thrust of Professor Weatherill’s
argument – but as we’ll see, I take a different view of the aim of Article 50.
Thirdly, consistency with other provisions dealing with the same issue is
important. This reasoning is sensible in principle, but it’s hard to see how to
apply it by analogy to withdrawal from the EU, since Article 50 is the only
provision on the subject.

I can foresee a fundamental
objection here: the revocation of a residence permit concerns a Member State’s
power to regulate non-citizens on its territory, which is quite different from
its relations with other Member States. Fair enough. So let’s look at a
process, set out in the EU Treaties, which does
concern the precise question of whether a Member State which has made a
notification to the EU institutions can revoke that notice unilaterally.

I’m referring to the process of
‘enhanced cooperation’, as set out in Article
329 and Article
331 of the Treaty on the Functioning of the European Union. This process,
rarely used, allows some Member States to go ahead without the others to adopt
EU legislation. The procedure gets underway when a group of willing Member
States makes a request to the Commission to start it. But what happens if one
of those States becomes unwilling to
participate in the planned enhanced cooperation, during the process of
negotiations? Can it, in effect, withdraw the notification of its intention to
participate?

The EU Council legal service has
given a detailed opinion on this issue. You can find it here,
heavily redacted. But a helpful little bird has given me the entire text. Let’s
see what it says on the key issues. (Note that the UK government has
already relied on earlier legal advice to the same effect).

At the outset, the Council legal
service notes that ‘[t]he Treaties are silent’ on the possibility of a Member
State withdrawing its wish to join in enhanced cooperation during the
negotiation process. But ‘[i]n the absence of any express provision, recourse
must be had to the interpretation of the relevant Treaty provisions on enhanced
cooperation, bearing in mind its objectives and two fundamental attributes that
govern its functioning: first, the voluntary character of participation in it;
second, its openness and flexibility.’

On the first point:

The decision
as to whether or not to take part in enhanced cooperation is for the Member
States alone, on the basis of their own wishes. The basis of enhanced
cooperation is thus a voluntary act of each Member State. The expression of the
wish to participate in enhanced cooperation and the subsequent withdrawal of
such a wish is an act of free will of the Member States, whose voluntary
character only ceases to exist at the moment of adoption of the act
establishing enhanced cooperation. (footnotes omitted)

The first step in the process –
authorising enhanced cooperation – ‘determines that the conditions for having
recourse to enhanced cooperation are fulfilled, thus enabling the willing
Member States to proceed with it. However, that decision does not create an obligation to do so’. (emphasis added)

On the second point, the openness
of enhanced cooperation is ‘characterised by [the] simplicity’ of the rules,
needing no fresh decision for a Member State to join enhanced cooperation which
is already underway or under negotiation.

While it is not possible for
participating Member States to withdraw from enhanced cooperation once it’s
established:

Before that
point in time - during the period from the date of adoption of the authorising
decision to the establishment of enhanced cooperation - and bearing in mind the
voluntary, open and flexible character of enhanced cooperation, a Member State
is entitled to withdraw its stated intention to participate.

The first step decision to
authorise enhanced cooperation ‘does not definitively establish the content
thereof’ and Member States ‘must…be able to stop their participation in the
establishment of enhanced cooperation’. Furthermore:

Not allowing
unilateral withdrawal at this stage could have the effect of discouraging
Member States from proceeding with enhanced cooperation before knowing its
precise and definitive content, running thus counter the objective (sic) of
"promot[ing] participation by as many Member States as possible” (Article
328(1) second subparagraph TFEU).

The procedure for a Member State
to revoke its intended participation in enhanced cooperation should be simple
and purely unilateral:

In the view of
the Council Legal Service, no modification of the authorising decision is
required for the withdrawal of a Member State to take effect. In the absence of
any formality required by the Treaties, a Member State wishing to withdraw from
enhanced cooperation should simply notify its intention to the Council and to
the Commission in written form or through a statement delivered at a Council
meeting. No further act of the Council and/or of the Commission is necessary
for the notification to take effect. As from the moment of such notification,
the Member State concerned should no longer be considered as wishing to
participate in the establishment of enhanced cooperation and therefore, should
not take part in the vote for the adoption of the act.

….A more
formalistic approach requiring, for instance, a modification of the authorising
decision would ignore the voluntary, open and flexible character of enhanced
cooperation, since the interested Member State would not be able to withdraw on
its free will, but would depend on the will of the Commission to propose an
amending act of the authorising decision, of the Council to adopt the amended
authorising decision and of the European Parliament to grant its consent.
(footnotes omitted)

While a legal service opinion is
not binding – the Council wins some cases, but loses others – this is an
interesting analysis which could apply by analogy to the Article 50 process.
The absence of a provision on revocation of intention is not decisive: instead,
the key point is the voluntary and flexible nature of the process, and the
overall objectives of integration. A Member State can change its mind
unilaterally, even after the first step in the procedure has passed, as long as
the final decision has not been made. Article 50 is equally a voluntary
process, and also has a first step (notification of withdrawal) followed by a negotiation
phase before withdrawal becomes definitive. And the overall integration
objectives of the EU are obviously served by facilitating a Member State’s wish
(if it chooses) to reconsider its decision to leave the Union.

I’ll now turn to the detailed arguments
of Professor Weatherill. First of all, he argues that, as a matter of policy,
the costs of Article 50 negotiations are an issue which suggests unilateral
revocation is not possible. But such an approach is not taken in analogous EU
procedures. Some proposed EU laws can be blocked by the veto of a single Member
State. Terminating the negotiation process in the event of such a veto imposes
costs, but no one argues that a Member State therefore lacks a power to wield
its veto unilaterally in such cases. Equally a proposed Treaty amendment can be
frustrated by the failure to ratify by a single Member State. And the strongest
analogy is the accession process, which can be scuppered by a would-be Member
State ending negotiations or refusing to ratify an accession treaty, despite
the enormous efforts expended on the ratification process.

In all these cases, the power to
act unilaterally is unquestioned, despite the inconvenience caused to other
States and EU institutions. That awkwardness stems necessarily from the
exercise of national sovereignty – the very sovereignty which is embodied in
the right to withdraw from the EU, to which Article 50 gives effect. Furthermore,
in the particular context of the UK, it seems odd to be concerned about the
costs of a revocation of the Article 50 notice which would be suffered by the
EU27, given that a U-turn on Brexit would mean that a major net contributor to
the EU budget keeps on contributing. In any event, holding detailed
negotiations on revocation of withdrawal will impose more negotiation costs
than simply accepting the revocation and returning to the status quo – with
Adonis resuming skiing and Farage resuming screeching. (Yes, I know: they never
really stopped).

On the issue of democracy,
Professor Weatherill again repeats the argument as regards costs. But let me
repeat the same rejoinder: the very possibility of withdrawal gives priority to
the democratic choices made in the withdrawing Member State over the impact of
that choice in the remaining Member States. Indeed, ‘a revocation does not
affect only the UK’; but the same could be said, with much more force, of the
power of withdrawal. Yet the Treaties accept that the power of withdrawal lies
with the UK alone; vesting the power of revocation with the withdrawing Member
State alone is a logical corollary.

As for the wording of Article 50,
I draw the opposite conclusion from it. Indeed, there are detailed rules on the
roles of the EU institutions and the EU27 Member States in negotiating and
concluding a withdrawal agreement. But there are no such rules on the role of
those institutions and States in the event that a Member State revokes its
notification. One can reasonably deduce from this either that no revocation is possible, or that unilateral revocation is possible –
although note that the ECJ case law and Council legal service opinion above
prefer the latter interpretation in analogous cases. But the least plausible
interpretation is that the Treaty drafters intended such rules but just forgot
to mention them. To strengthen the argument, look at the detailed procedural
rules relating to Treaty amendment, accession, and the negotiation of treaties
between the EU and non-EU states, which were all amended in the same Treaty of
Lisbon that created Article 50. How odd for the Treaty drafters not to set out
rules on the procedure for agreeing revocation of an Article 50 notice at the
same time.

What about the possibility of a
Member State revoking its withdrawal notice and then issuing it again, to get
more time to negotiate withdrawal? I agree with Professor Weatherill that the
notion of ‘abuse of law’ is indeed ‘hazy’. But at least this notion already exists in EU law, and so could be
clarified if necessary in the event of such alleged abuse in the Article 50
context. On the other hand, Professor Weatherill’s argument for negotiated
revocability relies on conjuring up procedural rules which don’t explicitly
exist in the Treaty, and are not recognised to exist in any case law to date.
If ‘abuse of rights’ is a hazy notion, then ‘procedure for negotiating revocation’
is a Dickensian fog by comparison.

Equally, if revoking a withdrawal
notice places a strain on the wording of Article 50, then inventing a process
to negotiate revocability places a bigger strain still. And while one purpose of Article 50 is undoubtedly
to protect the remaining Member States’ interests, another purpose is to give priority to the sovereign decisions of
the withdrawing Member State. The best way to reconcile the alleged conflict
between these two purposes in the event of a unilateral revocation of a
withdrawal notice is to conclude, as I noted above, that all the underlying objectives of the EU are best
served by allowing a withdrawing Member State to decide to remain in the EU
after all, should it wish to do so. This neatly balances the EU’s interest in
its integration process with a Member State’s sovereign power to decide on
whether it wishes to leave or stay in the EU.